South Africa-based international research firm, SBG Securities (Pty) Limited, has said about nine commercial banks would be able to pay dividends this year, despite the new policy adjustment issued by the Central Bank of Nigeria (CBN). The banks are Zenith Bank Plc, Guaranty Trust Bank Plc (GTBank), United Bank for Africa Plc (UBA), Access Bank Plc, Fidelity Bank Plc, Stanbic IBTC Plc, First Bank, First City Monument Bank Plc, and Ecobank.

Recall that the CBN recently released a circular making an amendment to a previous circular dated October 8, 2014, on internal capital generation and dividend payout ratio. The new circular introduced some conditions for banks to be allowed to pay dividend, which are the Composite Risk Rating (CRR) of the bank, NPL Ratio, and Capital Adequacy Ratio (CAR).

While banks do not publicly disclose their Risk Rating, the minimum capital adequacy ratio for international banks is 15 per cent, 10 per cent for national banks, and 16 per cent for systemically important banks.

Based on the new policy, analysis from a CAR perspective, SBG Securities analysts maintained that based on their nine months 2017 unaudited results Zenith, GTB, UBA, Access, Stanbic IBTC, Fidelity, and FCMB are not affected by the policy.Going by the results released in September 2017, most of the banks not restricted from paying dividend have either exceeded or are close to their 2016 full year profit level.

Fidelity Bank with a profit before tax of N16.2billion in September 2017, has done 147 per cent of its 2016 full year profit, while Sterling Bank with N6.6billion pre-tax profit has done 131 per cent of its 2016 full year profit. Similarly, Stanbic IBTC had also done 123 per cent of its 2016 full year pre-tax profit in the same period.
Other banks close to their 2016 full year gross profit include Zenith, GTB, Access and UBA. These banks will most likely pay at least the same dividend paid in the previous financial year.

The analysts noted that banks, which belong to a holding company (HoldCo) structure such as FBN Holdings Limited, could typically still pay dividend, which would be derived from their non-bank subsidiaries.

Meanwhile, the CBN policy does not apply to ETI Group (parent company for Ecobank Nigeria) because it is not regulated by the CBN.According to the analysts, dividend payout estimates are in line with the regulation, as they had previously emphasised the need for a reduction in pay outs to build buffers, adding that for the 2017 earnings, the highest dividend pay-outs will come from Zenith at 50 per cent, and GTB at 49 per cent.

They reiterated their positive dividend payout outlook for 2017 earnings, estimating 21 per cent average growth in dividend per share for the listed banks in their 2017 estimates, driven primarily by strong earnings growth.